Fixing our broken housing market | Portico

The government released the housing white paper, but what does it mean for landlords, first-time buyers, homeowners and renters in London?

Portico London estate agents have summarised the five key points to be aware of:

1.    Get Britain building more homes!

The white paper starts with a passionate pledge from Prime Minister Theresa May to get Britain building:

“We need to build many more houses, of the type people want to live in, in the places they want to live… This will slow the rise in housing costs so that more ordinary working families can afford to buy a home and it will also bring the cost of renting down.”

So what exactly are the government’s plans to encourage house building and deliver 1 million new homes by 2020 as they promised pre-election?

  • “We will encourage housing associations and local authorities to build more.”
  • “Ensure that homes are built quickly once planning permissions are granted.”
  • “We will diversify the housing market, opening it up to smaller builders and those who embrace innovative and efficient methods.”
  • “Finally, because building the homes we need will take time, we will also take more steps to continue helping people now, including by improving safeguards in the private rented sector, and doing more to prevent homelessness and to help households currently priced out of the market.”

2.    Longer tenancies & mandatory electrical checks

Perhaps the most radical and important announcement for landlords was that the government will now be encouraging “family-friendly” tenancies by ensuring they are longer-term.

Currently more than four million households rent their home from a private landlord, which according to the white paper, is nearly twice as many as 10 years ago. Demand for rental accommodation is clearly sky high, and the paper claims this is because it’s “nigh on impossible” for tenants to save enough for a deposit for their own property.

The government hopes longer-tenancies will make renting safer and more secure.

What do the experts think?

“Longer tenancies have long been long talked about and whether they are actually wanted by either landlords or tenants. In previous white papers there was still the provision for adding in break clauses, which meant that either party would be able to end the term before the three year period. The majority of tenants and landlords enjoy the flexibility that comes with renting, and fixing long-term contracts can somewhat hinder this freedom.

More importantly, current tenancies across London average around 22 months, with very few ended by landlords. I therefore see fixing longer tenancies having little impact on how people view renting in London, and I don’t believe it will affect the current average term.” Robert Nichols, Managing Director, Portico.

It’s also worth noting that at this stage, longer tenancies will only apply to rental homes provided by housing associations and institutional investors. The government however has stated that they will be working closely with the British Property Federation to “ensure these longer-tenancies become widely available”.

More red tape for landlords?

The government also announced in the white paper that they were considering mandatory electrical checks for rented properties.

“The law as it stands provides an obligation for landlords to ensure that their electrical installations and equipment are safe, but other than in HMOs there is no requirement to produce a yearly or 5 yearly certificate in the same way that the rules are clear on Gas safety checks. The vast majority of landlords care about ensuring their properties are safe and well maintained, but at present there is too much confusion on what exactly their obligations are.

Our advice is to have an annual test of the Portable Appliances and a 5 yearly full electrical check, but unfortunately many landlords don’t do this and risk issues with their electrics during the tenancy.” Michael Kennedy, Property Management Director, Portico.

According to the white paper, the next steps on these initiatives will be sent out “shortly”.

3.    Affordable rent

There was more good news for renters as the Affordable Homes Programme will now be opened up to include Affordable Rent.

The paper announced that planning and other laws will be changed to see developers provide “affordable rent homes”, which are defined as 20% below market values.

Its aim is to encourage more investment in building homes for affordable rent, with councils being encouraged to get more involved.

4.    Lifetime ISA & Starter Home Initiative

The government may have ditched their “ownership at all costs” mantra, but the white paper still announced new measures to help renters get a foot on the property ladder…

In April 2017, the Government will introduce the Lifetime ISA, which Robert Nichols states “will come as welcome relief to the increased tax burden on the nation!” This ISA will help renters save for a deposit, entitling them a 25% bonus on up to £4,000 of savings a year. Their savings and the bonus can be put towards a deposit for a home, or withdrawn when they reach 60.

In addition to a Lifetime ISA, the white paper also declared that they will be launching the Starter Homes Initiative. The scheme will help first-time buyers under the age of 40 to buy a house with a 20% discount on market rates. Buyers are only eligible for the scheme if they have an income of more than £90,000 in London or £80,000 elsewhere in the UK.

5.    The Green Belt battle

To build or not to build on the green belt! This has been a heated discussion for quite some time now, with many MPs arguing that building on the green belt was necessary to free up the space the country needs for housebuilding.

The white paper has ended the debate, confirming that Green belt protection will not be weakened apart from “exceptional circumstances.”

As Housing Minister, Gavin Barwell, said: “The green belt is 13% of the land. We can solve this crisis without having to take huge tracts out of the green belt.”

Article courtesy of Portico London estate agents.